Leading All Blacks, including captain Sam Cane, Aaron Smith and Dane Coles have outlined their concerns around a proposed private equity deal in a letter to NZ Rugby. Photo / Getty Images
EXCLUSIVE
By Liam Napier and Elliott Smith
More than half a dozen of the country's leading rugby players, including All Blacks captain Sam Cane, have threatened to block a proposed private equity deal worth $465 million over concerns it could ruin the team's relationship with fans - and have issued a warning that New Zealand Rugby's Māori and Pasifika culture is "not for sale".
In an explosive letter sent to NZ Rugby directors and clubs, obtained by the Herald, the New Zealand Rugby Players' Association (NZRPA) expresses serious concerns over an offer to sell a 15 per cent stake in the organisation's commercial rights to United States technology investment giant Silver Lake.
The letter is signed by David Kirk, the 1987 All Blacks World Cup-winning captain and NZRPA chairman, and chief executive Rob Nichol on behalf of the players' board - including All Blacks and Black Ferns stars Cane, Sam Whitelock, Aaron Smith, Dane Coles, Sarah Hirini and Selica Winiata.
The lengthy feedback, sent to NZR directors and clubs in late January, details concerns about "capital and expertise", "control" and "risk" and urges that alternative capital raising approaches such as government or public bonds be explored.
"We have concluded that we will not grant approval for the restructure and sale proposed by NZR and believe we should communicate that conclusion to you now," the letter states.
"The decision to not grant approval to the sale of a minority interest in New Zealand Rugby has been arrived at after careful consideration by the board of NZRPA."
As first reported by the Herald last month, Silver Lake's offer for a share of the commercial rights valued at $3.1 billion follows negotiations for much of the past year and would be the biggest in the game's history and a first in New Zealand sport.
The country's 26 provincial unions are set to vote on the deal - that would see the creation of a new separate entity dubbed CommercialCo - at an NZR board meeting next month. The Herald understands a sale ratio between 10 to 15 per cent will be agreed on Monday.
As part of the collective bargaining process, however, NZR requires the NZRPA's approval to sign off on the deal. This is where a major standoff has ensued.
Pressed by the Herald this week on whether that position had changed, Nichol said: "It's a confidential letter, it was our communication to New Zealand Rugby in January given the information we had.
"We continue to work with them in good faith as we always do. We keep an open mind and continue to do our due diligence on the proposal they've got before us."
The Herald can today reveal that $40m of the Silver Lake deal has been initially earmarked for immediate injection into the New Zealand game – 75 per cent of which would go to community level and shoring up balance sheets – with a proposal for the players to receive $6.5m.
"From the players' perspective they are probably the one group that will be fine," Nichol said. "This is not about the players and what they earn, it's very much about is this the right thing for New Zealand rugby? Whatever is right for NZ rugby will ultimately benefit the players anyway.
"We find ourselves in an interesting position, which I can't say I ever envisioned we would be in. Rightly or wrongly, we are in that position that apparently they require our approval so we're taking it really seriously because it's a much bigger decision than us."
Meanwhile, on Wednesday, NZR presented an independent PWC report into the Silver Lake deal to the provincial unions, Super Rugby franchises and NZRPA. It is understood the report supported pushing ahead with the minority sale, detailing the impact it could have on areas such as safety, participation, women's rugby and engagement.
Constitutionally NZ Rugby requires 50.01 per cent support from the provincial unions to pass the deal but is seeking a more significant mandate. On the basis of the PWC report, the provincial unions are expected to largely vote in favour, which would leave the NZRPA kingmakers.
Provincial unions spoken to by the Herald said the deal could inject as much as $50,000 into individual grassroots clubs, while player agents suggest walking away from the Silver Lake offer would see NZ Rugby left behind on the global scale as CVC Capital Partners injects large private equity sums into the northern game.
With NZ Rugby's financial model under severe pressure, as the national body continues to spend more than it earns and confront millions of dollars in Covid-19-inflicted losses, the NZRPA acknowledges the need to raise revenue.
But it instead advocates hiring outside expertise, rather than selling a stake in the national game. It says NZR does not need to sell 15 per cent of income-generating assets, especially at a high cost of capital, to rebuild depleted reserves and grow revenue streams.
"All of these ends can be achieved by accessing much cheaper capital, proceeding with the creation of a separate CommercialCo, hiring and incentivising world-class talent and engaging sports service providers directly," the letter states.
Concerning loss of control, the NZRPA asserts, should the Silver Lake deal proceed NZR management will become increasingly distanced from strategic commercial relationships. The NZRPA claims the NZR board will, therefore, hold less and less control of its destiny.
The letter also claims that in future it is certain there will be a "divergence of interests" between Silver Lake and NZR, and that conflicts of interest will arise when the US firm inevitably invests in other national unions such as Australia.
Listing risks, the NZRPA suggests the deal could change the nature of the relationship between supporters and their national teams, and cites concerns around the potential sale of Māori and Pasifika culture woven within NZ Rugby.
"We know many players are, and believe many other New Zealanders would be, uncomfortable with the thought that NZR was selling income-generating assets that relied, in part, upon cultural practices and understandings that they consider not for sale under any circumstances.
"There is an inherent risk of real or perceived cultural misappropriation given Silver Lake is an Anglo-American private equity firm.
"The risks all arise because of the irrevocability of a sale of equity in NZR's income-generating assets. It is clear that once a share in the assets is sold it will never be bought back."
Asked by the Herald for a response to the NZRPA's concerns, and whether the Silver Lake deal could be blocked, NZ Rugby said in a statement: "We are on a path to see what an investor partner might look like for NZR, which has entailed thorough due diligence and consultation with our stakeholders.
"A critical part of this process has been an independent report that was undertaken by an external party - to ensure we had a wholly objective view.
"On Wednesday that report was shared with our stakeholder group and it has reinforced the benefits of the transaction we are now exploring – across our entire ecosystem from community right through to our teams in black."
NZ Rugby Players' Association response to NZ Rugby:
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